Federal Scholarship Tax Credit Explained

You may have heard about the new Federal Scholarship Tax Credit that is scheduled to begin in 2027.

Here’s the short version:

Taxpayers in participating states may be able to receive a federal tax credit of up to $1,700 for donations to approved scholarship granting organizations (SGOs) beginning in January 2027. Those organizations would then use the donated funds to provide scholarships for eligible K–12 students.

Because this is a tax credit rather than simply a charitable deduction, it can reduce the donor’s federal tax bill dollar for dollar, up to the allowed amount. For example, if you donated $1000 to the program and your federal tax bill was $5000 that year, the owed amount would be reduced to $4000.

NOTE: The donation does not come back to the donor’s own child; scholarship organizations would separately award funds to eligible students.

Each state must choose whether to participate. For now, California has not opted in.

There has been some discussion in California about participation, including a nonbinding legislative resolution encouraging the state to join the program, but no final decision has been made.



If California does participate, we will be watching closely to see how the program may apply to homeschool families, including what kinds of educational expenses could qualify and how families would apply for scholarships.

There are still details being worked out at the federal level, and HSC will continue to follow this issue and share updates as we learn more.